New figures from financial information provider, Moneyfacts, have shown that Annuity rates fell by over 10% in 2012 causing more misery for retirees who are already having to cope with rates falling in 14 out of the last 17 years.
This revelation got us thinking. How can you improve your Annuity rate? What steps can you take to get the best possible income in retirement?
Whilst there is nothing you can do to buck the current downward trend, there are things you can do to “make the best of a bad job” and give yourself the best possible start to your retirement.
1. Is an Annuity right for you? Consider other options
If you are looking for a guaranteed income for life and would like a simple solution to the problem of taking an income from your pension, then an Annuity could well be the right choice for you.
However, if you are prepared to take some investment risk and perhaps see your income fluctuate, why not consider Income Drawdown as another option?
This would allow you to take income now, without tying yourself into the currently very low Annuity rates. As an alternative, if you do want some guarantees and can’t cope with fluctuating income, consider a Fixed Term Annuity, which will allow you to take income now with a future guaranteed fund value, which you can use to buy a traditional Annuity when the time is right.
2. Enhance your income
If you suffer from any medical issues, and we mean anything, no matter how trivial it may be, then investigate whether you qualify for an Enhanced Annuity, which can help to improve your income by taking into account health or lifestyle issues. Always check, medical problems you think are trivial and you cope with on a day to day basis may qualify. You only get one bite at this cherry, you can’t change your Annuity, if you find out in months to come you would have qualified it’s too late, check now and you might be pleasantly surprised.
3. Shop around
We’ve lost count how many times we’ve said that people should not take the first Annuity they get offered, which usually comes from your existing pension provider. Shop around for a better rate, the Annuity market is hugely competitive and the Annuity providers want your business, use this in your favor, shop around and haggle for an even better rate.
4. It isn’t always about the best income
You might be surprised when we say this but getting the best income doesn’t always mean you have the best Annuity. For example if you opt for a level Annuity, with no guarantees or spouse’s pension, you will get the best rate, but it might not be appropriate for your needs, especially if you die before your spouse leaving him or her struggling financially.
Sure, you need to squeeze every penny out of your pension, but don’t do it at the expense of getting an Annuity which is right for your circumstances.
5. Take advice, but don’t pay too much
Taking independent advice is crucial when you reach retirement. Not only will an Independent Financial Adviser (IFA) have access to Annuity providers not open to the general public they will be able to advise you on whether an Annuity is right for you in the first place and also the options you should include.
Sure, you will have to pay them a fee, but this shouldn’t be any more than the commission you would pay if you were to approach an Annuity provider direct.
In these times of falling Annuity rates you really do have to do everything you possibly can to improve the income you will get in retirement.
You might think it’s hard work, and not worth the bother, but hopefully you will be retired for many years to come, that’s when your hard work, research, shopping around and any advice you take, will really pay off.
Writing for Investment Sense, retirement expert, Phillip Bray looks at ways to get the best possible Annuity income, from starting with a basic pension Annuity calculator to taking advice, Phillip will show you how to maximise your income in retirement.